By Anora Mahmudova and Barbara Kollmeyer, MarketWatch
Tech and biotech stocks lead losses on Wall Street
NEW YORK (MarketWatch) -- U.S. stocks were bludgeoned in
Wednesday trading with the Dow threatening a 300-point drop as the
Nasdaq Composite suffered its steepest decline since April 2014 as
investors dumped technology and biotechs shares.
The carnage on the Street marks the third consecutive losing
session, with the S&P 500 and Dow industrials recording the
sharpest losses in two weeks and occurred as one of the year's
biggest mergers, a deal between Kraft Foods Group Inc. and H.J.
Heinz Co., was announced in the morning.
Analysts attributed the selloff to pre-earnings season jitters
and investors cashing out of stocks in companies that have seen big
run-ups.
The Nasdaq Composite (RIXF) ended the day down 118.21 points, or
2.4%, at 4,876.52.ost 19.06 points, or 0.9%, to 2,072.44.
Biotechnology stocks were hit the hardest, with the iShares Nasdaq
Biotechnology ETF (IBB) dropping 4.1%.
The S&P 500 (SPX) fell 30.45 points, or 1.5% to 2,061.05,
with nine of its 10 main sectors finishing sharply lower. Energy
sectors stocks defied the trend and followed a rally in oil prices
higher sparked by an intensifying conflict in Yemen.
The Dow Jones Industrial Average (DJI) lost 292.60 points, or
1.6% to 17,718.54, and turned negative for the year. All but two of
its 30 components closed lower.
Quincy Krosby, market strategist at Prudential Financial, said
investors are beginning to fret about first-quarter earnings and
fear the disappointment will be worse than expected.
"Traders began buying protection from downside, which means they
are very nervous," Krosby said, pointing to a jump in the implied
volatility as measured by the CBOE volatility index, which rose 13%
to 15.42.
"Investors have been selling top-performing, high-beta stocks
for several sessions now, so people owning biotechs and high-flying
tech stocks decided to lock in profits and exit before the earnings
season began," Krosby said.
John Manley, chief equity strategist at Wells Fargo Advantage
Funds, also attributed the selling action to the jitters stemming
from uncertainty about the Fed policy and expectations that
earnings would be poor.
"Typically, high-multiple stocks, such as biotechs and
technology stocks get clipped badly during such times," Manley
said.
"There are also concerns that the Fed might be tightening too
soon, given very weak growth we are experiencing," Manley
added.
One sign of that economic softness was durable good orders,
released ahead of the start of trading on Wednesday, which fell
more than expected
(http://www.marketwatch.com/story/february-durable-goods-orders-drop-14-in-weak-report-all-around-2015-03-25)
in February, suggesting businesses remain reluctant to invest more
aggressively.
Dan Greenhaus, chief global strategist at BTIG, said the market
is still digesting economic reports in the wake of a Federal
Reserve that said it would be "data dependent" in determining the
pace of its first rate hike in nine years.
"Today's durable-goods orders were in line with poor data of
late, which suggest that the first-quarter GDP will be weak,"
Greenhaus said.
Stocks to Watch: Shares of Kraft Foods Group Inc.(KRFT) surged
more than 36% after a merger was announced with H.J. Heinz Co
(http://www.marketwatch.com/story/kraft-and-heinz-to-merge-in-deal-to-create-company-with-revenue-of-28-billion-2015-03-25).
Shares of Kofax Ltd.(KFX) were up 46% after the software company
agreed to be acquired by Lexmark International (LXK) late
Tuesday.
For more on notable movers, read Movers & Shakers column
(http://www.marketwatch.com/story/red-hat-apollo-education-pvh-earnings-in-focus-2015-03-24).
Other markets: European stocks ended lower. In Asia, the
Shanghai Composite Index snapped a 10-day winning streak, and the
Japan Nikkei 225 index edged up 0.2%.
The dollar (DXY) shifted slightly lower Wednesday after data
showed German business confidence rose in March
(http://www.marketwatch.com/story/ifo-german-business-confidence-rises-again-2015-03-25)
for the fifth straight month, hitting its highest level since July
2014.
Oil prices (CLK5) settled above $49 a barrel on Wednesday as
turmoil in Yemen raised concerns over crude supplies in the Middle
East. Gold prices (GCK5) rose for a sixth straight session, gaining
$5.60, or 0.5%, to settle at $1,197 an ounce.
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